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Senators Introduce Bill To Delay Redevelopment Shutdown By Two Months

Two state senators, answering the pleas of numerous local government officials across California, introduced a bill last Friday to postpone the dissolution of redevelopment agencies by two months.

If passed, Senate Bill 659, co-sponsored by Senators Alex Padilla (D-Pacoima) and Michael Rubio (D-Shafter), would allow redevelopment agencies to close their doors on April 15, rather than on Feb. 1.

Padilla said the mass shutdown of redevelopment agencies in the state could result in litigation over existing redevelopment projects and job losses. “Successor agencies and the state may face huge liabilities and jeopardize school funding. I have introduced SB 659 to provide state leaders time to craft the necessary solutions,” he said.

AB X1 26 was passed into law last year and would have eliminated redevelopment agencies by Oct. 1, 2011.

Supporters of the dissolution of redevelopment say the move would re-route tax dollars toward education and other social services. Those who challenge the elimination of redevelopment say lawmakers are more interested in balancing the state budget on the backs of local governments.

A coalition of cities brought a lawsuit against the bill to eliminate redevelopment agencies, but on Dec. 29, the California Supreme Court ruled in favor the bill, upholding it. The dissolution deadline was set at Feb. 1.

However, the court also ruled that an “escape clause” bill, AB X1 27, allowing cities to keep their agencies for a significant fee was unconstitutional, leaving many cities that hoped to keep their agencies at a loss.

Since the court ruling, city officials all across California have been calling for a bill to delay the closure of redevelopment agencies. The Commerce city manager and a councilwoman were among the officials who traveled to Sacramento last week to speak to lawmakers for a bill to delay the deadline, which they say would also give lawmakers an opportunity to come up with an alternative to redevelopment.

Furthermore, the law would give reprieve to many cities, especially those that have used redevelopment funds to pay a portion or all of some employees’ salaries and are now facing the prospect of laying off city employees.

Cities say they have used redevelopment agency funds to attract developers to their cities, remove blight, and build affordable housing. Local governments can keep a higher percentage of funds in a redevelopment area than in a non-redevelopment area for these purposes. The agencies wield greater powers than most public agencies when buying and developing land in areas of the city designated as “blighted.”

During the last week, the cities of Montebello, Commerce, and Monterey Park voted on resolutions affirming that they would take on the responsibility of winding down their redevelopment agencies. As the so-called successor agencies, they would be responsible for selling off assets, paying off debts, and finishing projects already in progress.

A successor agency would receive 5 percent of the 2011-2012 tax increment, and 3 percent each year after that, but not less than $250,000 a year to perform its liquidation duties.

Montebello could receive $700,000 in the first year toward the liquidation of its redevelopment agency.

Commerce officials estimate their successor agency would receive $950,000 in the first year to cover administrative costs.

Though there are some rough estimates, many cities are unsure at this point of the total cost of becoming the successor agency. Monterey Park officials say there are potential legal costs related to the Atlantic Time Square project, a dispute regarding the Towne Center, and legal costs related to the Market Place agreements; but they also say the city may be protected from some of these costs depending on how the liquidation rules laid out in AB X 26 are interpreted.

Los Angeles chose not to become a successor agency, giving up control over the liquidation of as many as 86 major projects worth about $4 billion. The city’s legislative analyst warned that if it did not sever ties with its redevelopment agency, it could be on the hook for $109 million in salary and retirement costs.

Under the Padilla-Rubio bill, Los Angeles officials may have an opportunity to change their minds if the terms for becoming a successor agency are improved.

SB 659 would allow cities like Los Angeles to reconsider becoming a successor agency by Feb. 15.

It would also make sure scheduled payments are made to the state in their entirety on or before June 1, 2012, as provided in this year’s budget, according to the bill’s authors.

The bill keeps the original October 1, 2011 deadline for invalidating contracts between redevelopment agencies and a city or county to protect the state from RDA and parent transfers that occurred after the court decision and before February 1, 2012.